Wipro’s acquisition of Singapore-based L.D. Waxson Group
will aid the company to tap demand for luxury skincare products
among China’s growing middle class, said Vineet Agrawal,
president of the Bangalore-based company’s consumer unit. L.D.
Waxson’s Bio-essence range includes creams that contain bird’s
nest, used in traditional Chinese medicine for its anti-ageing
and tissue repair properties, according to Agrawal.

The $144 million purchase, announced in December, offers
Wipro access to the premium skincare market in China, which
Euromonitor International estimates will expand to 38.2 billion
yuan ($6.1 billion) in 2016 from 22.1 billion yuan last year and
is dominated by Procter & Gamble Co. and Mary Kay Inc. The deal
also helps the unit tap skincare demand in Southeast Asian
markets with sizable ethnic Chinese populations, Agrawal said.

“Bio-essence is a skincare brand focused on products with
Chinese ingredients,” Agrawal said in a telephone interview
yesterday. “Wherever the Chinese ethnic population is there, we
think we can expand - like in Vietnam and Indonesia.”

Chinese Delicacy

Almost 60 percent of Bio-essence products contain
ingredients derived from bird’s nest, according to Agrawal. The
nests, made mostly of the swiftlet’s saliva, are found in the
mountains around Southeast Asia including in Vietnam, Thailand,
Indonesia and Malaysia, according to L.D. Waxson’s website.

The nest of a few species of swiftlets is also the key
ingredient in bird’s nest soup, a Chinese delicacy, the Food &
Agriculture Organization says on its website. Malaysia is the
major producer and exporter of the nests, according to the FAO.

“These products have an advantage in markets where there’s
an awareness, like in eastern Asia,” said Shushmul Maheshwari,
chief executive officer at RNCOS E-Services Pvt., a market
research company based in New Delhi. “In India, herbal products
are always perceived as safe.”

The shortage of bird’s nests in China isn’t hurting Wipro’s
supplies of the commodity, Agrawal said. “We do long-term
purchases for everything,” he said. “As of now, we don’t have
any problems ensuring supply.”

‘Optimal Use’

Wipro is among Indian firms acquiring companies overseas to
boost sales as growth slows in India, where the government
estimates the $1.8 trillion economy is set to expand 5 percent
in the year ending March 31, the least in a decade.

Revenue growth at Wipro’s consumer care and lighting
business slowed to 18 percent in the 12 months ended March 31,
2012, from a 26 percent pace a year earlier. Hindustan Unilever
Ltd., the Indian unit of the world’s second-biggest consumer-goods company, last month reported third-quarter profit and
sales that missed analysts’ estimates.

Godrej Consumer Products Ltd., controlled by billionaire
Adi Godrej, has acquired at least five companies in the last
three years, including Indonesian insecticide maker PT Megasari
Makmur and Argentinian hair-color maker Argencos SA.

Indian consumer companies’ strategy of acquiring assets in
other emerging markets will help future growth and is an
“optimal use of cash,” said Nitin Mathur, a Mumbai-based
research analyst at Espirito Santo Investment Bank.

Second Best

Godrej’s share of overseas sales increased to 43 percent in
the year ended March from 23 percent two years earlier,
according to data compiled by Bloomberg. The company’s 12-month
total return, which includes share price gains and dividend
payout, is the second-highest among the 10 companies on the BSE
India Fast Moving Consumer Goods Index, and trails only India’s
biggest distiller, United Spirits Ltd.

Marico Ltd. got almost a fourth of its annual revenue from
its international business, which includes Bangladesh, Vietnam
and South Africa, and 43 percent of Godrej’s overseas sales last
quarter came from Indonesia.

“Indian consumer companies have a strong presence in Asian
developing markets because the sales environment there is very
similar to India,” said Sachin Bobade, an analyst at Brics
Securities Ltd. “There is a lot of growth potential in these
markets.”

In November, Wipro’s board agreed to set apart its
consumer, infrastructure engineering and medical diagnostics
businesses into a separate, closely held company, according to
an exchange filing. Wipro will focus exclusively on information
technology and software services and the new company, named
Wipro Enterprises, will be an unlisted entity.

Yardley Brand

The consumer unit, which includes lighting products, had
sales of 10.3 billion rupees ($191 million), or 9.3 percent of
Wipro’s net revenue from operations, in the three months ended
Dec. 31, compared with 8.79 billion rupees a year earlier. The
bulk of the unit’s revenue comes from sales of the Santoor bath
soap and Yardley range of soaps and deodorants, Agrawal said.

Premji, with a net worth of $16.6 billion and ranked 46th
on the Bloomberg Billionaire’s Index, and his family control
about 78 percent of Wipro.

Shares of Wipro fell 0.6 percent to 409.45 rupees at the
close in Mumbai, paring its gains this year to 3.8 percent. The
benchmark BSE India Sensitive Index has advanced 0.9 percent in
the period.

In 2009, Wipro acquired rights to the Yardley of London
brand of beauty products in Asia, Middle East and parts of
Africa from the U.K.’s Lornamead Group for about $45.5 million.
The acquisition gave Wipro an entry into the more profitable
business of selling premium cosmetics. In July, the unit
acquired the rights to the brand for the U.K. and most of
Europe, it said in a statement.

Good Fit

Wipro’s Chinese consumer business currently contributes
about $40 million in sales, or 5 percent of the unit’s total
revenue, Agrawal said. The company sells shampoos, soaps and
moisturizing creams under its Unza brand, and its sales are
mostly concentrated in Guangdong, Hainan and Guangxi provinces
in southern China. Wipro bought Singapore’s Unza Holdings Ltd.
in July 2007 for 10.1 billion rupees to add customers and
factories in Malaysia, Vietnam, China and Indonesia.

Wipro, which posted third-quarter revenue growth of 32
percent at its consumer business in China, 26 percent in
Indonesia and 24 percent in Vietnam, expects the L.D. Waxson
acquisition to help maintain its growth momentum in Southeast
Asia, Chairman Premji said on a conference call last month.

L.D. Waxson “is a good strategic fit,” Premji said. “The
transaction helps us to consolidate our successful facial
skincare business in Malaysia to a dominant leadership position
and moves us to market leadership in Singapore as well.”